The FTC Makes its Google Investigation Official, Now What?

No surprise here. The WSJ announced it was coming yesterday, and today Google publicly acknowledged that it has received subpoenas related to the Commission’s investigation. Amit Singhal of Google acknowledged the FTC subpoenas at the Google Public Policy Blog:

At Google, we’ve always focused on putting the user first. We aim to provide relevant answers as quickly as possible—and our product innovation and engineering talent have delivered results that users seem to like, in a world where the competition is only one click away. Still, we recognize that our success has led to greater scrutiny. Yesterday, we received formal notification from the U.S. Federal Trade Commission that it has begun a review of our business. We respect the FTC’s process and will be working with them (as we have with other agencies) over the coming months to answer questions about Google and our services.

It’s still unclear exactly what the FTC’s concerns are, but we’re clear about where we stand. Since the beginning, we have been guided by the idea that, if we focus on the user, all else will follow. No matter what you’re looking for—buying a movie ticket, finding the best burger nearby, or watching a royal wedding—we want to get you the information you want as quickly as possible. Sometimes the best result is a link to another website. Other times it’s a news article, sports score, stock quote, a video or a map.

For now, until more details become available, it strikes us that the following points should be emphasized:

For several reasons, the Federal Trade Commission’s investigation into Google’s business practices seems misguided from the perspective of competition policy directed toward protecting consumer welfare. We hope and expect that the agency will conclude its investigation quickly and without any enforcement action against the company. But it is important to note that this is merely an investigation–and at that, one that is not necessarily new. More importantly, it is not a full-fledged enforcement action, much less a successful one; and although such investigations are extraordinarily costly for their targets, there is not yet (and there may never be) even any allegation of liability inherent in an investigation.

In any such case, the focus of concern must always be on consumer harm–not harm to certain competitors. This is a well known antitrust maxim, but it is certainly appropriately applied here. We are skeptical that consumer harm is present in this case, and our writings have explored this issue at length. In brief, Google of today is not the Microsoft of 1998, and the issues and circumstances that gave rise to liability in the Microsoft case are uniformly absent here.

Related, most of the claims we have seen surrounding Google’s conduct here are of the vertical sort–where Google has incorporated (either by merger, business development or technological development) and developed new products or processes to evolve its basic search engine in novel ways by, for instance, offering results in the form of maps or videos, or integrating travel-related search results into its traditional offerings. As we’ve written, these sorts of vertical activities are almost always pro-competitive, despite claims to the contrary by aggrieved competitors, and we should confront such claims with extreme skepticism. Vertical claims instigated by rivals are historically viewed with skepticism in antitrust circles. Failing to subject these claims to scrutiny focused on consumer welfare risks would be a mistake whose costs would be borne largely by consumers.

The fact that Google’s rivals–including most importantly Microsoft itself–are complaining about the company is, ironically, some of the very best evidence that Google’s practices are in fact pro-consumer and pro-competitive. It is always problematic when competitors use the regulatory system to try to hamstring their rivals, and we should be extremely wary of claims arising from such conduct.

We are also troubled by statements emanating from FTC Commissioners suggesting that the agency intends to pursue this case as a so-called “Section 5” case rather than the more traditional “Section 2” case. We will have to wait to see whether any complaint is actually brought and, if so, under what statutory authority, but a Section 5 case against Google raises serious concerns about effective and efficient antitrust enforcement. Commissioner Rosch has claimed that Section 5 could address conduct that has the effect of “reducing consumer choice”—an effect that some commentators support without requiring any evidence that the conduct actually reduces consumer welfare. Troublingly, “reducing consumer choice” seems to be a euphemism for “harm to competitors, not competition,” where the reduction in choice is the reduction of choice of competitors who may be put out of business by pro-competitive behavior. This would portend an extremely problematic shift in direction for US antitrust law.

8 responses to The FTC Makes its Google Investigation Official, Now What?

I have used many Google products for years without ever forking over a single cent to Google. Those product have enriched my life, and they are integrated in a way that makes them more useful. If it were otherwise, I would go elsewhere. Why do we have a government agency whose sole purpose seems to be to investigate companies that succeed in providing consumers with products that they want? We shouldn’t. Forget about moving the FTC across town — it is time to get rid of it.

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